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Dutch foreign minister Halbe Zijlstra said the delay in forming a new German government was "bad news for Europe."

In Berlin, even German president Frank-Walter Steinmeier warned that "incomprehension and worry would be big in particular in our European neighbours, if political powers did not meet their responsibilities."

The failure of talks between Merkel's Christian Democrats, the liberal FPD and the Greens on Sunday "is clearly a problem for the EU," noted Yann-Sven Rittelmeyer, from the European Policy Centre (EPC) in Brussels.

"There is a need of leadership at EU level, and the EU cannot have momentum without Germany," he told EUobserver.

In Brussels, officials have tried to dispel concerns that Merkel's difficulties will send the EU into a crisis.

No pause

"Europe will not pause during this period," the European Commission's spokesman said on Tuesday.

He added that as planned, the EU executive will present its proposal on the future of the economic and monetary union (EMU) on 6 December, ahead of a eurozone summit on 15 December.

"We're not going to grind to a halt," an EU diplomat told this website.

He admitted that some decisions could be delayed, on issues like migration or energy. But the diplomat said that discussions on the so-called EU leaders' agenda on the future of the EU, like the EMU roadmap at the summit, will not be blocked.

"There is a caretaker government in Germany," he insisted. "We know who is in charge. It's still Merkel."

But behind the scenes, a high-level official from a member state admitted, "there is some concern that Germany will continue to be passive in the European debate."

Recent proposals on the EU's future by Macron and from the European Commission "are waiting for an answer from Germany," Rittelmeyer noted.

'Jamaica' not dead yet

In Germany, "the show is not over and intense negotiations are going on to try to rescue the 'Jamaica' coalition," said Judy Dempsey, from the Carnegie Europe think tank in Berlin.

But if the political deadlock "drags on, or even if there is new elections, or even a minority government, it's a big setback for Europe," she told EUobserver.

She insisted that "it would incredibly damaging for Europe if Germany doesn't come up with a government soon."

"Something has to be decided in the next two weeks," she said. "Germany and Europe cannot afford this for long."

"There will be risks, there would be uncertainty, no decision would be made, unless Macron can do it with some allies," she said.

With Merkel tied up by a lack of a government, "Macron is alone at the top now in Europe," she added.

Reinhard Buetikofer, who participated in the failed coalition talks, puts the blame squarely on FDP being 'afraid to govern', but hopes "there will be a lot of phone calls" to German politicians on the consequences of the deadlock in Berlin.

Chancellor Merkel disowned her agriculture minister over his decision to back a renewal of the weedkiller's licence as the issue pits Social Democrats against Christian Democrats ahead of coalition talks.